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Determinants of the Public Debt and the Role of the Natural Resources: A Cross-Country Analysis

Authors:
Elkhan Richard Sadik-Zada at Ruhr University Bochum
Elkhan Richard Sadik-Zada
Andrea Gatto at Kean University
Andrea Gatto
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This paper investigates the major drivers of the public debt growth in 184 countries. The underlying cross-country survey is based on the improved compilation of datasets on the central government debt for 2013. The study finds that oil abundance, economic growth rate, the share of mineral rent in the total revenue, interest rate payments for foreign borrowings, and being a developing country have statistically significant impact on the growth of the public debt. In contrast, defense spending, unemployment rate, and inflation rate do not have a statistically significant impact on the public debt rate. Being a developing country has a statistically significant negative impact on the level of the central government debt.
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FEEM Working Paper 004.20
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FEEM Working Paper 004.20
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... The research from [34] that conducted using a cross-country survey of 184 countries. Using the linear regression model, the study finds that in developing countries, public debt is significantly positively influenced by the oil abundance, economic growth rate, interest rate payments for foreign borrowings and the share of mineral rent while the defense spending and inflation rate, and unemployment rate does not have a significant impact on the developing country debt. ...
... The long-run coefficient for GDP growth shows that 1% increase in GDP growth could cause a 14.70% increase in public debt (Table 10). Despite the result being in accordance with the studies conducted by [34], it has opposed the debt sustainability framework by IMF and the above journal findings. According to the [51], Singapore does not incur debt for recurrent spending needs but instead borrows to meet specific long-term objectives such as infrastructure projects. ...
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